China should streamline its various bond investment channels - ASIFMA

Reuters Staff

3 Min Read

HONG KONG, Nov 29 (Reuters) - China should streamline its cross-border bond investment channels to make it easier for foreign investors to access its market and boost trade, said Patrick Pang, head of fixed income and compliance at Asia Securities Industry and Financial Markets Association (ASIFMA).

“Foreign investor registration under the bond connect is quite good so far, but trading volumes remain quite low except for the first day,” Pang told Reuters on Wednesday.

“So for the next step of reforms, the Chinese authorities should sit together and think how to streamline all the available investment channels as there are too many different channels at the moment which make investments complicated,” Pang said.

China launched the Bond Connect scheme in July, the latest step in opening up its bond markets, under which eligible institutional investors in Hong Kong and abroad can buy and sell in the world’s third-largest debt market without a quota.

Before the Bond Connect was launched, foreign investors were already able to invest in the $9 trillion bond market under the China Interbank Bond Market (CIBM) programme, as well as Qualified Foreign Institutional Investor (QFII) and Renminbi QFII (RQFII) schemes.

“All the four channels are segregated now and investment under one programme cannot be sold under another,” Pang said, adding that it made more sense if these could be consolidated into one system.

This issue is indeed a concern for foreign investors as they are offered new channels to enter China while they still have investments in other earlier schemes.

“Different programmes are not entirely fungible. If you hold something in RQFII, you cannot sell it in CIBM or through Bond Connect. That remains a challenge,” said Stephen Chang, head of Asian fixed income at J.P. Morgan Asset Management, who was speaking at an ASIFMA forum.

“To us, getting access to China is a big thing, something very strategic that we want to do. But at the same time when you consider you (only need to) have a Euroclear account to settle all different currencies, we need to set up separate accounts for each one of these programmes in China and that is an operational inefficiency to me,” said Chang, referring to stock and bond settlement house Euroclear.